The short-term duration of sales promotions generally makes the incremental revenue impact quantifiable, immediate and temporary. Because even the most successful advertising requires repeat exposure against target audiences for effectiveness, the revenue impact is longer term but hard to quantify. Small-business owners, traditionally challenged with arriving at an optimal balance between the two, generally opt for the predictability of sales promotion incentives over the costly uncertainties of advertising.

Incremental vs. Base Sales

Advertising and sales promotions play a vital role in driving demand for goods and services. Advertising is sometimes described as giving consumers a "reason" to buy. In contrast, sales promotions give consumers an "incentive" to buy now. Advertising serves the brand-building function of developing favorable brand perceptions, thereby giving consumers an intuitive reason to buy. Sales promotions work at the cognitive level to give consumers a rational reason to "buy now," because of a "limited time offer" or some other incentive.

Comparing Returns on Marketing Investment

Advertising's return on marketing investment routinely takes a licking in comparison to sales promotion's ROMI, because of the ill-defined metrics typically used for evaluating advertising's performance as a driver of "base sales." Fuzzy metrics is not a problem for sales promotions, because promotions drive incremental sales, which are easily quantified. Not withstanding that comparing the two ROMI's is analogous to comparing apples and oranges; advertising's share of the marketing budget declined 12 percent between 1998 and 2008 in favor of sales promotions and direct marketing, according to Jack Myers Media Business Network. Similar to sales promotions, direct marketing likewise generates quantifiable sales results.

Marketing Mix Modeling

Marketing mix modeling is the process of using computer modeling to compute the effectiveness of different marketing activities. Effectiveness is usually defined in terms of a marketing activity's ROMI -- the sales volume generated by the activity divided by the cost of the activity. Most models use "incremental sales" as the dependent variable, with different marketing activities being the independent variables. As such, it is obvious why advertising consistently takes a beating relative to sales promotions in ROMI comparisons. Advertising typically does not generate incremental sales.

Enhancements to modeling techniques since the early 2000s incorporate the impact of input variables on base sales and a host of consumer behavior variables gleaned from "big data." These new techniques quantify what marketers always assumed; brand advertising grows base sales. By using these enhanced modeling tools, marketers are better equipped to document advertising's impact on revenue.

Nourishing Base Sales

You need sales promotions to be competitive. Moreover, retailers now realize that they control the real estate. The shift in market power from supplier to retailer mandates offering sales promotions and trade allowances just to get shelf space. Nevertheless, failure to nourish your base sales through branding advertising places the long-term viability of your business at risk. This is because base sales are neither fixed nor permanent; they can disappear without nourishment. Fortunately, branding is within reach of practically all small-business operators, because of lower-cost digital marketing that offers improved audience targeting and virtually free access to social media.

About the Author

George Boykin started writing in 2009 after retiring from a career in marketing management spanning 35 years, including several years as CMO for two consumer products national advertisers and as VP for an AAAA consumer products advertising agency. Boykin mainly writes about advertising and marketing for SMBs.